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This is how FM booster for realty sector, homebuyers may look like

NBFCs, which used to account for 90% of loans to developers, have stopped lending activity.

Aug 28, 2019, 03.01 PM IST
NEW DELHI: Setting up of a stressed assets fund, widening of the scope of affordable housing and announcing of dedicated income tax deductions for principal repayment of home loans are some of the measures industry watchers say could include in Finance Minister Nirmala Sitharaman’s booster measures for homebuyers and the real estate sector this week.

The FM last week suggested that her government will announce measures to address stuck realty projects.

Shishir Baijal, Chairman & Managing Directorat Knight Frank India said: “The government can consider a dedicated stressed assets fund that would underwrite stalled projects and ensure eventual completion of these. This will help lift sentiment of exiting as well as prospective consumers by allaying fears around non-delivery of projects.”

It must be noted that NBFCs, which used to account for nearly 90 per cent of loans to developers have stopped lending activity following the DHFL crisis. This has resulted in piling up of incomplete projects.

“Income tax incentives have been an important consideration for homebuyers and hence, a dedicated income tax deduction of Rs 1,50,000 per annum for principal repayment on housing loans will nudge indecisive homebuyers to consider a house purchase, Baijal said.

Emkay Global said that it would wait for clarity, even as it believes that any concrete and meaningful measures on the front could alleviate rising default risk in the real estate sector with financial institutions.

Baijal said that the government may enhance the scope of affordable housing by covering houses up to Rs 1 crore.

Such a move, he said, will enhance the spectrum of housing market that enjoys the benefits of fiscal, banking and other associated benefits.

The FM last week increased additional liquidity support by NHB to the housing finance companies (HFCs) to Rs 30,000 crore from current Rs 20,000 crore. She also announced passing on of rate cut benefits by banks to customers. Meanwhile, Sitharaman announced upfronting of Rs 70,000 crore of bank recapitalisation.

The steps are seen helping real estate developers raise funds and complete stalled projects.

Data showed that while sales volume has been increasing quite slowly, the average sale price has been declining, indicating lack of pricing power for developers.

This combined with the NBFC credit crisis and the reluctance of banks to lend money to developers will put pressure on the cash flows of the developers, said Nirmal Bang Equities.

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